Commentary and musings on the complex, fascinating and peculiar world that is securities regulation

Tuesday, August 21, 2012

SEC to Give First Dodd-Frank Whistleblower Award

A whistleblower will receive
nearly $50,000, in the first payout from a new SEC program to reward people who
provide evidence of securities fraud. The award represents 30 percent of the
amount collected in an SEC enforcement action against the perpetrators of the
scheme, the maximum percentage payout allowed by the whistleblower law.

“The whistleblower program is already becoming a
success,” said SEC Chairman Mary L. Schapiro, who advocated for the program.
“We’re seeing high-quality tips that are saving our investigators substantial
time and resources.”

“This whistleblower provided the exact kind of
information and cooperation we were hoping the whistleblower program would attract,”
said Robert Khuzami, director of the SEC’s Division of Enforcement. “Had this
whistleblower not helped to uncover the full dimensions of the scheme, it is
very likely that many more investors would have been victimized.”

The SEC did not approve a claim from a second
individual seeking an award in this matter. According to the Commission, the
information provided did not lead to or significantly contribute to the SEC’s
enforcement action, as required for an award.

The 2010 Dodd-Frank Act authorized the
whistleblower program to reward individuals who offer high-quality original
information that leads to an SEC enforcement action in which more than $1
million in sanctions is ordered. Awards can range from 10 percent to 30 percent
of the money collected. The Dodd-Frank Act included enhanced anti-retaliation
employment protections for whistleblowers and provisions to protect their
identity. The law specifies that the SEC cannot disclose any information,
including information the whistleblower provided to the SEC, which could
reasonably be expected to directly or indirectly reveal a whistleblower’s
identity.

Sean McKessy, chief of the SEC’s Whistleblower
Office, said that since the program was established in August 2011, about eight
tips a day are flowing into the SEC. “The fact that we made the first payment
after just one year of operation shows that we are open for business and ready
to pay people who bring us good, timely information.”